XBRL and the Internal Auditor

XBRL in the United States is currently most visible in regulatory reporting to the SEC. Many organizations have assigned the responsibility for XBRL to the financial reporting department, but is that the only area that should be involved? Is there a role for internal auditors in complying with SEC XBRL requirements and utilizing XBRL to gain internal reporting efficiencies? Let’s explore the internal auditor’s potential role in XBRL.

The management of an organization is responsible for ensuring that accurate and complete financial statements are produced. In this context, management is also responsible for XBRL formatted financial statement accuracy and completeness. The internal auditor can play an important role in providing some oversight to the XBRL financial statement preparation process including:

Providing comfort that internal controls over the XBRL process are adequate

Validating that business and financial data is tagged to appropriate US GAAP Taxonomy elements

There are also many opportunities for internal auditors when an organization tags the US GAAP Taxonomy deeply into its business and financial systems. Imaging that an organization tags XBRL into its ERP at the general ledger account and cost center level. Those XBRL tags could be utilized to feed financial data to a variety of systems such as consolidation and financial reporting software, tax software and regulatory reporting software. In addition, internal auditors could utilize the XBRL data tags to:

Move from statistical sampling of financial information to performing 100% testing by utilizing Excel, Access or similar desktop software.

Increase the ability to enforce controls and provide analytics that can be persistently shared for communication and collaboration with internal and external stakeholders, including external auditors

Have you limited the potential of XBRL in your organization? Is accounting and finance the only function involved in your XBRL process? Consider the longer term impact and benefit of XBRL. Now could be the time for you to involve your internal audit, information technology and tax functions to maximize the benefits of XBRL within your organization.